Renewing vs. refinancing a mortgage
What’s the difference between refinancing and renewing your mortgage? The terms are often used interchangeably, but they are different processes:
- Renewing a mortgage applies to the current mortgage loan. You will be looking for a new term and interest rate based on the amount remaining in your mortgage at the end of your term. This is great time to look at ways to reduce the principal amount by making a lump sum payment or changing payment amount and frequency.
- Refinancing a mortgage is a renegotiation of an existing mortgage loan and is usually used to access the equity in the home or take advantage of better mortgage terms. It’s a more involved process than renewing, especially if the loan amount is changing because it is essentially a new mortgage.
Reasons to refinance a mortgage
There are many reasons you may wish to refinance your mortgage. For example:
- You may be in the middle of a higher interest term and want to take advantage of a lower rate. Although there may be prepayment penalties to get out of the current mortgage, it might be worth it for the long-term savings of a lower rate. Your mortgage broker can help you weigh the options.
- If you have a lot of high-interest debt, you may wish to refinance and consolidate your debt into a single payment at a lower rate.
- You May wish to access the equity in your home to fund a renovation, purchase a second property, or invest.
Work with your mortgage broker to find your best options
Refinancing your mortgage is not as simple as visiting your bank. You should view it as though you are shopping around for a mortgage.
This is when you are well served by the expertise of a mortgage broker. First, we’ll do the legwork to find you the best rate you qualify for. We have relationships with both traditional banks and alternative lenders, which opens more options for terms and rates. A mortgage broker will also consider your immediate needs and your long-term goals when helping you select a mortgage. We are in your corner.